Gen Z’s Guide to Buy Now Pay Later

Ever wish you could get that new gadget now and pay for it in small chunks instead of all at once? Many Gen Zers do, thanks to “buy now, pay later” (BNPL) plans. A recent J.D. Power survey found that 54% of Gen Z shoppers used BNPL during the 2024 holiday season, outpacing credit card use. With BNPL apps like Klarna, Affirm, and Afterpay on their phones, young shoppers are rewriting the rules of buying stuff. In this guide, we’ll explain how BNPL works, why it’s so popular with Gen Z, and what to watch out for.

Picture yourself at the checkout of your favorite online store: you add those new sneakers to your cart, but instead of paying the full amount, you choose to split the price into a few smaller payments. That’s the basic idea of BNPL—short for “Buy Now, Pay Later.” Essentially, it’s a short-term loan that lets you pay for a purchase in installments. Most BNPL plans are interest-free, so you only pay the item’s cost as long as you make each payment on time. It’s like ordering something now and paying over the next few weeks. This can be really handy if you don’t have all the cash at once, but remember: it still needs to fit in your budget.

Check out this article on the best budgeting apps for beginners and discover how to take charge of your financial future with confidence.

Why Gen Z Uses Buy Now Pay Later

Gen Z shoppers have been quick to jump on BNPL. For many of us who grew up glued to our phones, the idea of tapping a few buttons feels totally natural. Smartphones and slick apps make BNPL easy – no paper forms or long credit checks required. In fact, payments expert Sean Gelles notes that BNPL “meets a need that is not being met by the existing products in the marketplace.” Payments Dive.

In plain terms, BNPL gives young shoppers something traditional credit cards don’t: instant, easy installment plans on the things they want now. This generation also often faces tighter budgets and student loan worries. Splitting a $200 sneaker purchase into four $50 payments can be less stressful than swiping a card for $200 immediately. And many BNPL services let you sign up with just a soft credit check or none at all, which appeals if you’re just starting to build credit. All these factors make BNPL apps feel like a convenient tool in a Gen Z lifestyle.

Pros and Cons of Buy Now Pay Later

Pros

BNPL lets you split big purchases into bite-sized payments, often with no interest attached. That means you pay exactly what the item costs, just over time. It’s also super convenient: you can use BNPL with a couple taps on your phone or at checkout. Many plans have simple sign-ups and reminders, and some even work in-store via QR codes. Essentially, BNPL can make budgeting easier by letting you plan payments in advance.

Cons

The flexibility comes with caveats. The same convenience that makes it easy can also tempt you to overspend. Investopedia warns that this “convenience can come at a cost, as you may be tempted to buy more than you can actually afford.”

If you miss a payment, late fees can hit hard. Even worse, missed BNPL payments can be reported to credit bureaus. Investopedia notes that if you don’t pay on time, “a collections agency could potentially get involved. This reflects poorly on your credit history.”

And don’t count on building credit just by paying on time – most BNPL transactions aren’t reported to credit agencies at all. That means on-time installments won’t boost your credit score. Finally, returns or refunds with BNPL can be more complicated than with a normal purchase, so it pays to read the fine print.

Tips for Using Buy Now Pay Later Wisely

• Budget like a pro. Treat a BNPL purchase the way you would a credit card charge. Only buy something you can afford in the long run, and keep track of all your installments so you don’t get blindsided by multiple due dates.
• Automate payments. If the app allows, set up automatic payments from your bank account or card. That way you won’t forget a due date and incur a fee.
• Use it sparingly. Don’t use BNPL for every little purchase. Save it for planned, one-time buys where paying over time is really helpful. That way you avoid stacking too many BNPL payments at once.
• Stay informed. Before you click the BNPL option, read the terms. Know what happens if you’re late, and double-check that the item qualifies (some retailers have restrictions).
• Compare options. Sometimes a regular credit card or a savings account might actually be cheaper if you can pay upfront or get rewards on your purchase. Weigh the perks of BNPL against alternatives like a zero-interest credit card offer or layaway plan.

Alternatives to Buy Now Pay Later

If BNPL doesn’t feel right for you, there are other ways to manage spending. Using a credit or debit card and paying off the balance each month can build credit and avoid fees (many credit cards have perks or cashback too). You can also save up in a dedicated fund or use a mobile wallet that lets you round up spare change into savings. Apps that help you budget or start an emergency fund can be great choices.

Ultimately, the goal is the same: pay what you can afford while avoiding high-interest debt. Buy now, pay later is just another tool in the financial toolbox. Used carefully, it can make some purchases easier. But like any tool, it works best when you understand it. Gen Zers are rewriting shopping habits with BNPL, and now you know how it works — for better or worse. Make smart choices, stay on top of payments, and you can use BNPL to your advantage without going off track.